Rakuten bolsters e-books by gobbling up distributor OverDrive

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Rakuten is trying to inject some black ink into its struggling e-book business with the acquisition of OverDrive Holdings, one of the largest providers of e-books for rent to libraries and schools.

The Japan-based e-commerce giant will gain about 21 million users in the US$410 million deal as well as a digital distribution platform with over 2.5 million titles and relationships with thousands of publishers, libraries and schools.

Cleveland, Ohio-based OverDrive makes rental e-books available as Web apps or e-reader files. While content on OverDrive's lending-focused marketplace is available on multiple platforms including Kindle from Rakuten rival Amazon.com, the move could boost the profile of Kobo, Rakuten's small e-reader company.

Rakuten sees huge growth potential in the public library e-book market, where spending on digital content is only 7 percent of library spending in the U.S., Takahito Aiki, who leads Rakuten's e-books business, said Thursday at an event in Tokyo.

"The near-term opportunity is for us to do a more direct integration with Kobo apps and devices, where you can instantly borrow a book from a school or library and have it appear on your Kobo bookshelf," OverDrive CEO Steve Potash said.

In the U.S., the dominant e-book platform for OverDrive content is Kindle and the dominant hardware is iPad, Potash said, adding that smartphones are now used by a majority of school and library users when reading books in digital form.

The acquisition of OverDrive, a veteran player in the e-books business, will bring Rakuten's e-books arm "close to break-even" on an EBITDA (earnings before interest, taxes, depreciation and amortization) basis in 2015, the Internet company said.

Rakuten bought Canada-based Kobo in 2012 and has enshrined digital contents as one of its three main pillars of business alongside e-commerce and finance.

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